3 Best Student Loans, Federal Aid & Grants available for College Students

Choosing the college that’s right for you is a hard decision, but affording it is another subject entirely. In the last twenty years, college tuition rates have increased by 130% and the average college student graduates with twice as much debt as he or she did ten years ago. In the United States alone, the total amount of student loan is hovering around one trillion dollars, and the average payoff plan for those debts can be fifteen years or longer.

While the federal government has a variety of financial aid and student loan options available, it’s important to educate yourself on the differences between those options so that you are in the best position possible to advance in your career and financially succeed after graduation and beyond.

3 Best Student Loans Available

There are three best federal student loans available to college students and they all have one thing in common — they must be repaid. Therefore, it is critical to understand the terms of each student loan and what your debt responsibility will be when you graduate before you decide which one is right for you.

1. Stafford Loans

Stafford Loans are available as subsidized (interest does not accrue until the student graduates or is no longer in school at least part-time) and unsubsidized (interest accrual begins immediately). The subsidized option is limited to people who demonstrate financial need while the unsubsidized version is available to anyone, regardless of their need.

2. Perkins Loans

Perkins Loans have lower interest rates and more generous borrowing terms than Stafford Loans (i.e. the grace period to begin paying back Perkins Loans is nine months after schooling ends, versus six months for a Stafford Loan), and are specifically for students with greater financial need.

3. PLUS Loans

PLUS Loans exist for graduate students or parents of undergraduate students. They are intended to help subsidize the tuition cost that other loans don’t cover and have higher interest rates and less generous borrowing terms.

Federal Grants

Federal grants are like free money and are primarily only available to students with financial need. Options include, but are not limited to, Pell grants, FSEOG (Federal Supplemental Educational Opportunity Grants) for students with exceptional financial need, and TEACH (Teacher Education Assistance for College and Higher Education) for students who want to teach in low-income schools. To learn more about grants, click here.

Work Study Programs

Work-study programs offer students with financial need the opportunity to work in exchange for tuition remission. While it’s tempting to think there’s no difference between a work-study program and a regular job, consider these differences:

Income from work-study does not count against your financial aid eligibility.

Employers will work around your class schedule.

You can choose to have your income applied directly to your tuition, to help reduce the risk of spending it elsewhere.

Work-study jobs can often be in your field of study, which is advantageous to building your resume and gaining relevant work experience before you graduate from college.

Applying for federal student aid

When you fill out the FAFSA (Free Applicant for Student Financial Aid), you apply for all these possible forms of federal student aid in one fell swoop. Based on your financial need, you will be awarded a financial aid package that could include a combination of all the options listed above. Every student entering college should fill out a FAFSA — as the name implies, it’s free and even if you think you won’t qualify, you might be surprised.

Managing Student Loans After Graduation

Know Your Student Loan(s)

Especially if you have multiple loans, it’s crucial to know the amount, the interest rate, the grace period, and the monthly payments of each one to plan and budget better.

Choose the Right Payment Plan

A smaller monthly payment isn’t necessarily better. Find out the best monthly payment option to ensure that you reduce your interest payments over time.

Overpay When You Can

Most likely, you will experience income fluctuations throughout your career. When the money is there, consider paying down your debt as much as possible. But before you do, notify your lender so that they put that payment towards your balance, rather than the next month’s payment

With the right planning, you could be one step closer to an affordable college education. Do your research, know your options, and choose best student loans, federal aids and grants available for you.

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